Background Briefing on Ukraine by Senior Administration Officials

Via Conference Call

11:17 A.M. EDT

MS. HAYDEN: Good morning, everyone. Thanks for joining the call and thanks for your flexibility. Obviously you just heard from the President about further steps we're taking in regard to the situation in Ukraine. I have senior administration officials here on background to talk to you in a little bit more depth about those measures. Again, they are senior administration officials for this call and there is no embargo.

With that, I'll turn it over to our first senior administration official.

SENIOR ADMINISTRATION OFFICIAL: Thanks, everybody, for getting on the call. I'll just make a few opening comments and turn it over to my colleague who will speak in more detail about today’s sanctions.

First of all, just to summarize where we are today, as the President said, we are responding to the Russian intervention in Ukraine, which has included an illegal referendum in Crimea, an illegitimate annexation of Crimea, and dangerous risk of escalation. And we have been deeply troubled by the positioning of Russian forces in such a way that threatens southern and eastern Ukraine. We've also been deeply concerned over threats to Ukrainian personnel, in Crimea in particular, as well as the treatment of minority populations in Crimea.

The President, in addition to the steps that we've already taken, is taking additional action to impose costs for what has already happened in Crimea. And today that includes using the authority of the executive order that he signed earlier this week to sanction 20 officials, which includes senior Russian government officials as well as cronies who hold significant resources and influence in the Russian system. And this also includes the designation of a bank that holds a significant amount of resources that are associated with the Russian leadership.

So these are costs that we are imposing for what Russia has done in Crimea, in Ukraine to date. And we will continue to impose additional costs. These sanctions under the executive order the President signed earlier in the week provides us the ability to continue building out our list, in coordination with Europe, of individuals and entities that we can sanction. So nobody should believe that this is the end of what we are prepared to do under the executive order the President signed earlier in the week. This is only the beginning.

In terms of what we are preparing for potential future consequences on the Russian government, today the President also signed an executive order that will allow us to impose sanctions on key sectors of the Russian economy. As we watch the Russian threat to Ukraine, to include the threats to southern and eastern Ukraine, we believe it is very important to signal that if Russia further escalates this situation they will be met with severe consequences. And we are imposing -- we are prepared to impose those consequences in coordination with our allies and partners as well. And this powerful tool will allow us the ability to calibrate our pressure on the Russian government.

As the President said, this would have a significant impact on the Russian economy. We would pursue it with care, given the fact that that could also impact the global economy. But there should be no mistake that Russia is far more vulnerable and would be severely isolated were we to move forward with these sector sanctions in response to further Russian escalation.

Just a few other comments before I turn it over to my colleagues to talk about the sanctions. We have been coordinating this closely with our European and Asian allies. We welcome the steps that Europe and Japan have taken to date to impose sanctions. Today the Europeans are meeting to further consider the steps that they may take. We have been in very close contact with them. They are well aware of the steps that we are taking today, and we have been speaking to them as they have developed their own sets of responses to the Russian actions.

Next week when the President travels to Europe, we expect that he will be able to meet with all of our key European allies. He will meet with the G7. He will also see some of our Asian allies. And on that trip, we will continue to discuss the costs that we can impose on the Russian government as necessary. We will also discuss the support that we can provide to the Ukrainian government going forward. We are also broadly supportive of the IMF moving quickly with a robust package to help support the Ukrainian economy, and we are also committed to working with our NATO allies to consider how to continue strengthening our collective defense. The Vice President carried a very strong message with him to the Baltic states and Poland about our commitment to NATO’s collective defense, and we will continue those discussions next week as well.

And with that, I'll turn it over to my colleague.

SENIOR ADMINISTRATION OFFICIAL: Thanks. And good morning, everybody. I think the press release announcing the sanctions should have gone out where we briefly describe what we're doing. So we are announcing today a broad set of designations, including a number of Russian government officials, including some senior Russian government officials, several influential Russians who are part of the Russian leadership’s inner circle, and a crony bank that handles the funds for senior Russian officials and other wealthy and influential individuals. These designations are being done under the executive order that was signed just a few days ago and follows through on the President’s commitment to impose costs for Russia’s actions in Ukraine.

Let me briefly describe who is being designated and the consequences of these designations. As I noted, there is a whole slew of Russian officials who are being designated. Some are quite senior and important and influential members of the Russian executive and legislative branches. Eight of these individuals were previously designated by the EU just a couple days ago, and so our designation list of Russian officials will conform to the EU list so we are acting in parallel with the EU. We are also adding six additional Russian senior officials to our list. Many of these were key actors in supporting the unlawful incursion into Ukraine, the bogus referendum that occurred over the weekend, and the illegitimate effort to annex Crimea.

Several of these individuals are also close confidantes of President Putin, part of his inner circle. In particular, I'd call your attention to Andrei Fursenko, who is an aide to President Putin and has been with Putin since 1993; Vladimir Yakunin, who is the chairman of Russian Railways, the major state-owned enterprise, regularly consults with President Putin on a number of issues involving the railways and other issues; and Vladimir Kozhin, who is the head of Administration of the Russian Federation since 2000. We go into more detail in the release on these individuals’ connections with senior leadership in the Russian Federation.

In addition to these three individuals, there are four others who are being designated for providing support to, receiving support from Russian government officials, and that is they’re being designated for being part of the leadership inner circle, colloquially known as the cronies.

One is Gennady Timchenko, who is one of the founders of an entity called Gunvor, which is a large commodity trading company. We are designating the Rotenberg brothers -- Arkady Rotenberg and Boris Rotenberg -- who are enormously wealthy individuals. They have received -- recently received about $7 billion in contracts as part of the Sochi Olympic Games, their personal wealth skyrocketing in the last two years as a result of those contracts that they received. And the last is an individual named Yuri Kovalchuk, who is essentially the personal banker for many senior officials in the Russian Federation, including President Putin.

And then finally, we are designating, as I noted, a crony bank -- this is a bank that provides services to senior Russian government officials -- called Bank Rossiya. It holds accounts that -- many of these individuals hold accounts at this bank, many individuals who have been designated. It is controlled by Yuri Kovalchuk, one of the cronies that we are designating today. It’s the 17th largest bank in Russia; it has about $10 billion in assets and has numerous correspondent accounts, including U.S. dollar accounts with institutions here in the U.S. as well as correspondent accounts in Europe and elsewhere.

In terms of consequences, the individuals who are being designated will have any assets in the United States frozen, will be barred from doing any business in the U.S. or with any U.S. business, with any U.S. financial institution.

We saw after the actions that we took on Monday some bluster from some of the individuals who we designated claiming that these sanctions on them would have no impact. I would suggest that if any of these individuals, including the ones that we are doing today, have any interest in doing any business outside of Russia in rubles they’re going to find great difficulty in doing so. They will be unable to access any U.S. financial services; they will find it difficult to transact in the dollar; and I suspect will find it very difficult to transact in Europe and elsewhere, as our partners around the world have demonstrated over time a willingness to also adhere to the sanctions that we are imposing. So I think these individuals will find their ability to continue to act in the world economy in any fashion severely constrained.

With respect to Bank Rossiya, we expect that this will have a significant impact on its ability to operate. It will be frozen out of the dollar. All the correspondent accounts that it has with U.S. financial institutions will be terminated. And we will work with our partners both in the government and in the private sector around the world to isolate Bank Rossiya and prevent it from operating to the greatest extent possible.

Going forward, we have now three executive orders that are at our disposal to continue to impose costs for the conduct that senior official number one described: The executive order from two weeks ago, which focuses on threats to the sovereignty and territorial integrity of Ukraine -- obviously those threats continue and we have the ability to continue to designate under that authority. The authority that was created earlier this week and that we’re acting under today, which allows us to designate Russian government officials, those in the inner circle of the Russian leadership, and entities in the arms and related material industry. And then the new executive order that the President signed today, which provides the Secretary of the Treasury the authority to designate, in consultation with the Secretary of State, sectors of the Russian economy for additional sanctions.

Once those sectors are designated as the Secretary determines, we will then be able to impose sanctions on specific entities within those sectors. This is a flexible tool that we can use in response to further provocations; for instance, action of the Russians to go into eastern Ukraine or western Ukraine, or other provocations as we deem appropriate.

With that, why don’t I conclude and turn it over to senior official number three.

SENIOR ADMINISTRATION OFFICIAL: I don’t think that we here on our side have anything to add. I think we’d be delighted to support answers to questions.

Q I’m just wondering, in light of the President’s statement -- which one of you echoed about these troubling military movements that suggests there could be further incursions -- whether there’s any thought being given to ways the United States or NATO could actually help the Ukrainian military either with intelligence sharing or any other ways that we might back them up, so that if they face a potential confrontation they’re not doing it by themselves. Thank you.

SENIOR ADMINISTRATION OFFICIAL: Thanks, Mark. Let me just say a couple of things, and I don’t know if my State colleague wants to add.

First of all, I think -- let me just reiterate that we are concerned by recent Russian military movements that could potentially pose a threat to southern and eastern Ukraine. As we have said, we are obviously already deeply concerned by what’s happened in Crimea. However, it would be a substantial escalation for Russia to move into southern and eastern Ukraine.

That is part of the context for the executive order that the President signed today. That is meant to send a signal that, should Russia escalate -- for instance, by going into southern and eastern Ukraine -- that these key sectors of the Russian economy are in play for sanctions. And we’ll be coordinating that with our European allies as well. But I’d just note that that context that this EO is in is very much being signed today in part because of our concern over those Russian movements and our ability to be prepared to respond should there be an escalation.

In terms of support for the Ukrainian military and Ukrainian government, it is our view that, as the President said yesterday, further escalating the conflict through the introduction of U.S. military forces in the Ukraine is not something that anybody is suggesting. What we have done is consult with the Ukrainians, number one, about how to help them meet immediate needs in terms of the economy, in terms of meeting the basic needs of their people. And then also, they have been able to consult with NATO through the NATO-Ukraine Council, and we have been in touch with the Ukrainian military officials about how they are viewing the situation, how they are responding to Russian provocations.

We have also considered what types of support we could provide to the Ukrainians, and the Pentagon has been reviewing that on a regular basis and has indicated that there are certain types of non-lethal support, for instance, that we are providing. And that is something that we’ll continue to review going forward based on how the situation evolves.

But I don’t know if you want to add anything to that.

SENIOR ADMINISTRATION OFFICIAL: I don’t think I have anything to add to that at this moment.

Q Hey, you’ve mentioned a couple of times key sectors of the Russian economy. Could you be specific to what sectors you’re talking about?

SENIOR ADMINISTRATION OFFICIAL: Sure. They’re listed in the EO, but my colleague can provide that background.

SENIOR ADMINISTRATION OFFICIAL: Yes, and these are illustrative lists of sectors that the Secretary of the Treasury could determine to include and then to designate entities in these sectors. It’s the financial services sector, the energy sector, metals and mining, defense and related material, and the engineering sector.

SENIOR ADMINISTRATION OFFICIAL: To add to that -- to be clear, we are now looking and thinking about ways we could actually operationalize this executive order should we decide to do it in response to continued or escalated Russian aggression. So we are looking at specific things we could do. I don’t have to get into that now, but this is an active and ongoing process.

Q Following up, first of all, on Mark’s question -- the Ukrainian government has asked for support, including ammunition and other -- I mean, non-lethal aid would be night vision goggles, but ammunition and some defensive weaponry. Why isn’t that being considered by the Pentagon? And given the hair-trigger amount of time that would be involved with the numbers of Russian troops on the border that we are hearing from the Pentagon, don’t you need to give that kind of help to the Ukrainians?

SENIOR ADMINISTRATION OFFICIAL: Sure, Andrea. First of all, let me say nobody wants the outcome here to be a full-bore military conflict between Russia and Ukraine. And, in fact, the Ukrainian government themselves have been quite restrained in not giving into provocation and not having this go the way of bloodshed.

So, as a general matter, it’s our view that the best course here is to lay down strong costs through the sanctions to signal that there would be a significant escalatory response to any further Russian provocation, and to seek to deescalate the situation. So we don’t want to take steps to add to a momentum of further militarizing the situation.

At the same time, though, I do want to be clear -- we will consider on an ongoing basis these requests from the Ukrainian military. And that involves our consultations with them about how they’re viewing the situation. That does involve specific types of support. But I wouldn’t want to overstate the notion that there is a timeframe under which we are going to build up the Ukrainian military to engage in a conflict with Russia. That’s just simply not the preferred outcome here.

And, frankly, if you look at where can we add value, where can the United States and our allies add value here, it is on signaling to Russia the significant political and economic isolation that would come with further escalation, and to shore up the Ukrainian economy so that they are stabilizing their economy, they are delivering for their people. That, ultimately, is a place where we can add far more value than any near-term military assistance, even as we will be reviewing that on a regular basis going forward.

Q You may have seen that Russian Deputy Foreign Minister Sergei Ryabkov told Interfax that if the U.S. took this move of adding additional designations, they would “raise the stakes” by changing their cooperation on the Iran nuclear talks. So I’m wondering, are you preparing for an asymmetrical response by the Russians that could tie in the Iran diplomacy or Syria diplomacy? And is that a price you’re willing to pay in order to raise the costs for Russia regarding Crimea? Thank you.

SENIOR ADMINISTRATION OFFICIAL: I’d just say a couple of things. First of all, with respect to the Iran talks, we recently concluded the latest round of discussions in Vienna. We saw no change in the posture of the P5-plus-1 and Iran in those talks related to the situation in Ukraine. So, to date, things have continued apace in terms of how we’ve worked with Russia and the other members of the P5-plus-1. That’s the first point I’d make.

The second point I’d make is that Russia has no interest in nuclear proliferation or an escalation of the situation in the Persian Gulf. And so, therefore, they’re invested in the diplomacy with Iran because it’s in their own interest; it’s not a favor to us. Were they to amend their posture, they would only further be isolating themselves. The P5-plus-1 is obviously a group that Russia has participated in for years and any reduction in cooperation would only further isolate Russia.

The last thing I’d say with respect to Iran is that the Iranian government is not in these negotiations to gain access to Russian sanctions relief. The Iranian government needs access to the European economy and the global economy. So they are incentivized to reach a deal with not only Russia but with the entire international community to include the United States and our European partners. That’s why they’re at the table. So we believe that that leverage is very much in place because of the coordination between the United States, Europe, and many other countries around the world, and Asia and other places.

Lastly, on chemical weapons, I’d just note that Russia is deeply invested in that project. We recently, according to OPCW reports, reached the threshold of 50 percent of the Syrian chemical weapons being moved out of the country. So that is proceeding apace. And we’re confident that given Russia’s own interest in seeing these weapons destroyed, we will continue with that effort.

SENIOR ADMINISTRATION OFFICIAL: If I can just add one more on Iran. We have never judged that Russia participates in the P5-plus-1 as a favor to us. Just to remind that were Iran to develop a nuclear weapon, that weapon would be a whole lot closer to Russia than to many of us.

Q This follows up obviously on questions that have already been asked but I wonder why, since your sanctions have been ex post facto in each case, have you considered at any point now having anticipatory sanctions -- in other words, having a deterrent of punishing in advance, or is that -- since the Russians don’t seem to have been deterred by what you’ve done after the fact? And secondarily, just on the Iran question, I wish you would address just what the Russians said. I mean, you said repeatedly, as you have many times in the past, why it doesn’t make sense for the Russians to not cooperate in the Iran negotiations, but the fact is that their Deputy Foreign Minister actually said this yesterday, so what is your sense of why he said it and does that change your assessment in any way?

SENIOR ADMINISTRATION OFFICIAL: I’ll take the second one first. Well, he was at the talks and nothing was any different at the talks in Vienna. So we will evaluate Russian actions. We take note of their words, but we have not seen a change in the P5-plus-1. Now, that may not stay the same. They may act on the words of the Deputy Foreign Minister yesterday. But all we can say is what we’ve seen to date, which is the P5-plus-1 is continuing a regular rhythm of political directors meetings and technical expert meetings. And as I said, our position is not going to change vis-à-vis Iran, which is they are going to need to demonstrate through these negotiations that their program is peaceful to the satisfaction not just of Russia but the P5-plus-1 as a whole. So we take note of his words but we’ll see how this situation develops going forward.

With respect to anticipatory sanctions, I think that’s a big part of what this executive order is today. This is signaling that if there’s further escalation, for instance, military intervention in southern and eastern Ukraine that we are prepared to target entities in these very significant sectors of the Russian economy.

So there’s always been both a responsive element and an anticipatory element to these EOs. In part, it takes time to fill in designations so we provide the authority and then Treasury and State work together to identify targets for designation. That’s what we’re going to continue to do. Some of this, like I said, is imposing a cost for what’s happened in Crimea. And we escalated those designations because of Russian actions through the week in terms of pursuing annexation. But we also are laying down a marker with this EO to anticipate any potential Russian escalation.

I’d just say, too, that, look, sanctions in many respects take time to sink in and to have that impact. You see some immediate market impacts and impacts on the ruble with respect to the Russian economy. And going forward, I think Russia stands to lose a lot from economic isolation that would come with the sanctions we’ve imposed and the broader sanctions we’re contemplating.

SENIOR ADMINISTRATION OFFICIAL: Let me just underline one aspect of this, and that’s the sanctions authorities that have been put in place over the last two weeks, including today’s authority, are all capable of greater use. They all have the authority for us to do additional designations. And so there’s both a responsive element to what we’ve done in terms of imposing sanctions on individuals who are themselves responsible for in one way or another what’s already transpired, but I think it’s also pretty clear, and I think becoming increasingly clear, that we are using these authorities in a pretty aggressive and powerful fashion.

So I think the cronies who were designated today, I suspect that some of their brethren who have accounts at Bank Rossiya or otherwise run in those circles are now asking themselves whether they’re next. So there’s an aspect to the designation process and to having these sanctions in place that also serves I think an important deterrent aspect going forward.

SENIOR ADMINISTRATION OFFICIAL: I want to underscore that last point. There may have been some in Russia who mistakenly believed that we would stop with the sanctions authorities announced on Monday. Not true, as today’s announcement indicates. Nor are we stopping now. As my colleagues have indicated, these sanctions authorities we now have are very broad. We are working actively to prepare additional sanctions under these authorities using their creative breadth to design sanctions that will hurt the entities with the smallest possible impact on us and our allies. We are working at this. We have some ideas, which we will be putting into effect. Sanctions build over time. They’re very powerful. And people may think that they are a mere wrist slap; I can assure them that they are not.

Q I’m sorry if this was already answered, I jumped on a little late. When Obama goes to the summits in Europe next week, is there anything in particular that you’re hoping that the G7 can do jointly, whether it’s officially removing Russia from the G8, whether it’s announcing joint economic assistance for Ukraine? Or do you see this more as kind of a country-by-country set of actions at this point?

SENIOR ADMINISTRATION OFFICIAL: Thanks, Julie. Well, first of all, with the G7, we have been coordinating very closely with each of those countries and with the G7 as a whole. With the G7 as a whole, we’ve suspended meetings with Russia going forward, and you’ve seen statements rejecting the legitimacy of the referendum in Crimea. With each of those countries, we’ve coordinated sanctions, and I should add, in addition to Europe, both Japan and Canada have been very strong in imposing sanctions as well.

And then in terms of what to expect next week, I do think that the leaders will want to focus on what support we can provide and how we can coordinate the assistance for Ukraine. And that’s both the assistance that G7 countries and other European partners can provide as well as our support for an IMF package as soon as possible. So I think you’ll see a focus on the affirmative support for the Ukrainian government.

We can also continue to discuss how to coordinate punitive actions like sanctions. The Europeans will be meeting on this today, making decisions. We will have to calibrate our responses going forward as well. And I’d also add the President will be in Brussels and he’ll have an opportunity to meet with the leaders of the EU there at the U.S.-EU summit as well as NATO. So in addition to the G7, we’ll be meeting with those two very important political bodies in Brussels.

So, again, I think you’ll see us working on our different lines of effort -- support to the Ukrainian government, imposing costs on the Russian government as well. And I’d just add, as we calibrate these sanctions going forward we want to be mindful of how to have an impact on Russia, but also how to mitigate impacts on Ukraine as well. So we are taking that into consideration as we develop these various options.

SENIOR ADMINISTRATION OFFICIAL: While we have this captive audience, can I throw out a few other things about what’s going on, on the ground in Ukraine?

SENIOR ADMINISTRATION OFFICIAL: Sure, go for it.

SENIOR ADMINISTRATION OFFICIAL: So just to say we’re not only watching military pressure on Ukraine, we’re also watching political and economic pressure on Ukraine. And, again, these sanctions have the potential to escalate based against all of those scenarios. In particular, we’re deeply concerned today that the Russians have appeared to close the border to Ukrainian goods entering Russia, effectively having imposed a trade embargo. This is unacceptable under their WTO obligations and many other things. So we’re watching that.

We are also watching the human rights situation in Crimea itself. The Russians say they intervened in order to protect human rights of ethnic Russians. What we have seen since the intervention there a serious worsening of the human rights situation in Crimea. We’ve had journalists and activists detained ever since, many beaten, some threatened at knife point and gun point, some strip searched, forced to stand outside in the cold for hours without proper clothing. They’re reporting their valuables were stolen.

We’ve obviously seen pressure on the Crimean Tatar community, including around the time of the referendum and since, houses marked with special markings in sort of a biblical fashion. And on Sunday, the body of a Crimean Tatar man was found in Bilogorsky region. He was reportedly abducted during a demonstration on March 3rd and the body showed signs of torture.

Finally, we’re watching the pressure on the Ukrainian Navy in Crimea, with the Russians having set a deadline of tomorrow for them to vacate their bases and hand over their equipment. Either they may join the Russian military or they can walk out of bases. The Ukrainians have proposed a joint commission with international support to deal with the disposition of the Ukrainian Navy and its equipment. This would be the civilized way to handle this and we are urging the Russians to avail themselves of a civilized path for dealing with this going forward. We’ll see how they choose to handle it.

Finally, on monitors, we have been pushing both in the OSCE and in the U.N. to get more civil and human rights monitors out to flashpoints within Ukraine and particularly the cities where the Russians claim that their own ethnics and citizens are under pressure. I would note that we’ve been working on a large OSCE mission for all parts of Ukraine but particularly for Donetsk and Kharkiv and those cities for some five days. And after repeated compromises on the mandate by the Ukrainian government, the Russians have continued to block and stonewall, even though they claim to say that monitors would be one answer to their concerns.